A gray area where the accounting is being perverted; where managers are cutting corners; and where earnings reports reflect the desires of management rather than the underlying financial performance of the company.
—Arthur Levitt, Chairman of the SEC (Securities and Exchange Commission, US stock market regulator and supervisor), 1998
1.1 FRAUD AND ITS EFFECTS
A fraud is the action of deceiving someone to obtain an unjust or illegal benefit. According to the Association of Certified Fraud Examiners (ACFE—the international reference organization in relation to fraud detection), the main types of business frauds are:
- Theft of assets: cash, overpriced merchandise, inflated expenses, employees who are paid but aren't working.
- Corruption: conflict of interests, bribery, illegal gifts, extortion.
- Accounting manipulation: overvaluation (or undervaluation) of assets, liabilities, expenses, and income. (ACFE 2016)
In recent years, the relevance of cybercrime or computer crime, which is fraud done through information technology (IT) tools or with the aim to destroy and damage computers, electronic media, and internet networks, has been increasing. Thus, according to a PricewaterhouseCoopers (PwC) global survey regarding business fraud, cybercrimes are already the second most frequent type of crime behind assets theft (PwC 2016).
Continuing with the ACFE (2016), the different types of fraud cost companies around 5% of their sales figure. ...